X

Exemption from Provisions related to Loan to directors of Private Companies

MCA vide notification dated 05/06/2015 titled Exemptions to Private Companies U/s. 462 of CA 2013 has provided that  Restriction on loan to directors provided under section 185 of Companies Act, 2013 shall not apply to following private companies:

(a) in whose share capital no other body corporate has invested any money;

(b) if the borrowings of such a company from banks or financial institutions or any body corporate is less than twice of its paid up share capital or fifty crore rupees, whichever is lower; and

(c) such a company has no default in repayment of such borrowings subsisting at the time of making transactions under this section.

So now Private Companies other than the subsidiary of a public company complying with above requirements can Give loans/ guarantee/security to Group Companies.

Compiled by Taxguru Team

Categories: Company Law

View Comments (6)

  • The problems of pvt. Ltd. companies with reference to this section will not be over as compliance to all the conditions especially (b) will be difficult. Most of the pvt. ltd companies are family concern and having minimal paid up share capital. The eligibility is double the paid up capital or Rs. 50 Cr which ever is lower. Rather it should have been which ever is higher.

  • Does the word borrowings (if the borrowings of such a company from banks or financial institutions or any body corporate is less than twice of its paid up share capital or fifty crore rupees, whichever is lower)also cover the short term liabilities outstanding in the name of company. for ex CC limit?

1 2
X

Headline

Privacy Settings